Texas public schools unexpectedly lost $300 million per year in federal special education funding amidst rising costs, the Texas Health and Human Services Commission notified school districts on Dec. 15.
The cuts are to the School Health and Related Services (SHARS), a federal special education program that allows Texas local educational agencies (LEAs) and shared service arrangements (SSAs) to request reimbursement for Medicaid health-related services. School districts are eligible for partial reimbursements when they directly offer medical services to students with special needs, instead of relying on a doctor or nurse.
The loss in annual funding relates to Medicaid reimbursements for special education students. It followed a court ruling in a billing disagreement between school districts and the federal government, dating back to 2017.
Cypress-Fairbanks and Houston ISD are expected to be the worst hit.
Wait a minute…how did we get here?
In 2017, a federal audit by the Office of Inspector General for the Department of Health and Human Services tried to trace how the Texas HHSC was billing the federal government for the schools’ health services. It revealed that Texas schools were not using coding while providing medical services to special ed students, which resulted in overpayments.
“Not all of the direct medical service costs that the State agency claimed for Medicaid SHARS were reasonable, adequately supported, and otherwise allowable in accordance with applicable Federal and State requirements. Specifically, the Contractor coded random moments incorrectly,” the office of the OIG, Department of Health and Human Services wrote in his report Texas Improperly Received Medicaid Reimbursement for School-based Health Services.
According to his findings, the result of these “errors” and overbilling, the agency received $18 million in unallowable Federal reimbursement for the Medicaid SHARS program from Oct. 1, 2010 to Sept. 30, 2011.
The OIG office recommended a refund to the federal government for the claimed Medicaid SHARS program reimbursement, and to comply with federal requirements to match its random moment sampling with statistical sampling standards. In other words, Texas needed to change its coding rules going forward.
Owing to this change, the districts that participate in the program have their reimbursements cut.
“ The reimbursements that were submitted in previous years — that is already gone,” Dax Gonzalez with the Texas Association of School Boards, told Texas Public Radio. “But this is an issue that’s going to continue through the future. And so, I think it’s going to take the HHSC, it’s going to take legislators, it’s going to take stakeholders and districts to work together to figure out how do we move forward.”
Upon losing the years-long appeal to the federal audit, the changes were implemented to the funding, and SHARS went through immediate cuts.
“HHSC notified providers of the fiscal impact of the federal government’s decision within weeks of receiving the final determination on Oct. 27, 2023. HHSC has also regularly and publicly stated that the potential impact of a loss of our appeal could result in the loss of hundreds of millions of dollars in funding,” a statement given to KUT.
Prior to learning the result of the appeal, the Texas HHSC planned on disbursing around $740 million in Medicaid reimbursements to districts — an amount that would have helped school districts cover special ed medical costs for students during the 2022 fiscal year.
School districts could not be notified sooner about the financial impact because the Texas HHSC was not aware of when their final appeal would be decided.
How does this impact schools?
The changes to this funding have a series of repercussions, as reported by Texas Public Radio.
- School districts now have to account for the funding cuts within months into the new school year,
- Dallas, and Cypress-Fairbanks ISDs will each receive more than $10 million less than HHSC expected to give them,
- Houston, Austin, and Katy ISDs will face special education deficits of more than $5 million each,
- Harlandale and San Antonio ISDs, to optimize the utilization of limited funds, will receive over $2 million less than initially anticipated,
- Northside ISD (San Antonio) will receive $14 million less than expected, accounting for the highest cut in reimbursements among all the school districts.
The number of students receiving special education services in Harris County has been increasing from the 2013-2014 to the 2022-2023 school years.
“We adopted our budget back in August of 2023 not knowing this. We are already in January, four or five months into our fiscal year,” Rene Barajas, Northside’s deputy superintendent of business and finance, told the Texas Public Radio. “We will do what we can to reduce costs wherever we can, to kind of take the sting off. But our budget is very, very tight. So we don’t have a lot of wiggle room.”
School districts in Texas will have to adjust the way they file for reimbursement in the future.
How will this affect special education in Texas?
Texas school districts have not received an increase in state funding for four years.
“This is exacerbating the problem of an already underfunded special education program in Texas. School districts right now are spending about $2 billion more per year than the state is reimbursing them for these special education services,” Gonzalez told Texas Public Radio. “And so, another $300 million to that is just insult to injury.”
In 2004, the Texas Education Agency limited the percentage of students (8.5% of students), affecting thousands of students. The Houston Chronicle reported in 2019 that students who were excluded from special ed services were less likely to graduate high school or enroll in college.
“Districts are still kind of working out of that hole,” Gonzalez said. “But it’s taking time, so the number [of students in special education is] growing, kids are requiring more and more services and more intensive services. And so, as those costs increase, districts are having to find other ways to cope with the budget impact.”
What does SHARS cover?
SHARS reimbursement is available for students with parental consent, which allows them to release identifying information to Medicaid. These students are required to be:
- 20 years of age and younger,
- Eligible for Medicaid,
- Enrolled in a public school’s special education program
- Meet requirements for special education as stated in the Individuals with Disabilities Education Act (IDEA), and
- May current individualized education program (IEP) that prescribes the needed services.
Services like audiology, counseling, nursing, occupational therapy, personal care, physical therapy, physician and psychological services, and speech therapy are covered by SHARS.
Black students in Special Ed
Black students are about 1.5 times more likely to receive special education, compared to white students. This raises concerns about the over-representation of minority students. Nevertheless, studies indicate that imposing limits on Black students in special education has resulted in modest improvements in high school completion and college attainment for both Black students in special education and those in general education. Research also suggests that SpEd misclassification among Black students can help reduce gaps in later-life success across races.
